Canada-China trade pioneer urges focus on Far East

When it comes to Canada’s relationship with China, few Canadian officials are as knowledgeable or experienced as former senator and federal minister Jack Austin.

The former minister of state under Pierre Elliott Trudeau in the 1980s, who is a recipient of both the Order of Canada and the Order of British Columbia, has been one of the most influential Canadian voices in Ottawa’s relationship with Beijing, with his work on promoting bilateral ties as a government official spanning almost four decades.

Austin’s work on the China file dates back to as early as 1971, when he was a deputy minister of energy, mines and resources and took part in Canada’s first trade mission to China. Since then, he has spearheaded efforts like former prime minister Jean Chrétien’s “Team Canada” economic outreach to Beijing in the early 1990s.

Looking back, Austin is incredulous about the pace of development in China over his tenure in Ottawa, which ended in 2007 when he retired from the Senate.

“In 1971, to get to Beijing, we flew to Hong Kong and took the train to the Chinese border, and Shenzhen was a little fishing village,” Austin recounted from his Vancouver office. “When we presented our passports, there were no facilities there. We were just out in the open. Walking the streets of Guangzhou, it was China from the 1800s, with two-storey buildings and people sitting on the streets doing business and living their lives. Today, any Chinese city has among the best infrastructure in the world and the finest architecture. And no one – including the Chinese – could have seen China’s success in building a modern economy for a billion people in the shortest time in history.”

It is exactly because of that rapid development that the Canada-China bilateral free-trade agreement – despite going through ups and downs in the past few months with Prime Minister Justin Trudeau’s December visit to Beijing failing to secure a formal start to talks – should continue to be among Ottawa’s prime agendas, Austin said.
He urged Canadians to embrace what he envisions as a crucial link in the chain of Canada’s economic well-being.

“The important thing – and Canadians don’t always keep this in mind – is that Canada is a trading nation,” he said. “We earn half our GDP from international trade; admittedly, three-quarters of that is with the United States, but we need trade because we don’t have a big domestic market….  For a while, we thought that we can make the United States part of our domestic market through [the North American Free Trade Agreement], but that is not proving to be the case in the way we’d like it to be.

“So the reality for Canada is we must trade, and we must trade with those who build our economy, and that’s why China is a very significant No. 2 priority in our trade strategy. We need to learn how to sell into that market, and that’s why you want a bilateral agreement.”

Austin would be among the Canadians most aware of Canada’s main advantage when doing business with China – its good reputation among the Chinese, fostered by famous Canadians in the 20th century. He noted that Canadian physician Norman Bethune, whose fame in China far outweighs his fame in his native country, was so influential in introducing modern care to rural Chinese that then-Chinese leader Mao Zedong wrote a eulogy for Bethune upon the Ontario-born doctor’s death in 1939. The text then became mandatory reading for students in the 1960s, cementing Canada’s image among the populace.

That image, Austin further noted, was strengthened when Ottawa, under John Diefenbaker’s government in the 1960s, transferred significant tonnages of wheat to China during a period of famine while agreeing to defer payment. Another Canadian champion of the relationship was Power Corp. magnate Paul Desmarais, whose effect on how the Chinese thought of Canada cannot be understated, Austin said.

“In the late ’70s and the ’80s, Desmarais had created the first Canada-China trade council, and there were only a handful of Canadian companies willing to look at the China market,” Austin said. “But it’s now often forgotten that Power Corp. had a subsidiary in the pulp-and-paper business that bought a mill in Castlegar [Celgar, now Zellstoff Celgar Ltd.], and Desmarais invited CITIC – China’s first experiment in a foreign investment company – to take a 50% interest. Desmarais guaranteed the borrowing by CITIC for that 50% interest. So it was right here in B.C. where CITIC got its first big domestic credibility through this Canadian effort.… It was a major moment of prestige and significance in the relationship between China and Canada.”

But while the historic ties are strong, Austin said Canada’s business relationship with China has not progressed as much as the trade ties pursued by other players in the global marketplace, such as Australia and New Zealand, in spite of the work of groups such as the Canada China Business Council. Austin said much of the cause can be found in a dearth of will and a lack of capacity among many Canadian businesses to pursue the Chinese market.

“The problem with Canada is that we are not a very large business country. We have some global-sized companies and some large regional companies, but SMEs [small and medium-sized enterprises] are still the majority, and they don’t have the managerial capacity to go to China. And there’s no urgency, because the United States and Europe are established lines of trade.”

Austin was present during two periods of major cooling of Canada’s relationship with China, the first after Beijing’s crackdown on the Tiananmen Square protests in 1989, the second during the administration of Stephen Harper’s government from 2006 to 2015. He emphasized that links were re-established after both instances. But he also agreed that many Canadians are skeptical about the relationship, and that presents a challenge in an environment where, he said, more economic ties are necessary.

“The Trudeau government has to get a lot of things reorganized, and in a democratic society, it has to persuade Canadians of the case for a bilateral relationship with China,” Austin said. “So that comes back to the question of how we accommodate our differences in values, and you get nowhere by confrontation.

“We have an underlying philosophy that the individual has an inherent set of rights as a person in society, and the Chinese system, whether communist or imperial, says the individuals have such rights as society’s leadership decides to allow them to have. When you have two different starting points, you have difference. So what do you do as a policy person in managing the relationship between people whose value systems are that different? The answer to that is to simply grow the relationship where commonality can be developed.”

Finding those common interests – whether they be environmental improvements, expansion of health-care availability or education – will be key, Austin said.
“We need to trade; our well-being depends on it,” he said. “The [free-trade agreement] with China is probably the most important bilateral agreement on the road ahead…. We’ll always need foreign capital; the easy part is the trade in mineral commodities. We have old trading patterns and relationships. The more difficult part in the future is the technology area. But we have a huge opportunity in those services sectors; our health system, despite all its flaws, is admired around the world, and the Chinese have sent many groups here to study it.

“If Canada wants a long-term working relationship with China, we have to educate Canadians in China,” Austin added. “We need more Canadians who know today’s China, who can do business there as Canadians.… And yes, we have very different systems, different histories and different experiences in areas of social growth and social order. But Canada should have no inherent fear of China. Yes, they have ideologies, but when it comes to the development of China, you are looking at the more pragmatic leadership in the world.”